Real Estate Investment in India 2024: Expert Insights

Vishnu B

| 17-01-2024



Real Estate Investment in India 2024: Expert Insights


Looking to invest in real estate in India? Get ready for expert insights on the booming market in 2024! Discover the hottest investment opportunities, insider tips, and strategies to maximize your returns. Take advantage of this guide packed with valuable information for aspiring real estate investors in India. 


Summary

I. Current State of the Indian Real Estate Market
II. Trends in Real Estate Investment in India
III. Government Initiatives and Policies Impacting Real Estate Investment
IV. Emerging Technologies in the Indian Real Estate Sector
V. Built To Rent: A Growing Demand in India
VI. Sustainable Development in the Indian Real Estate Market
VII. Real Estate Investment Trusts (REITs) in India


I. Current State of the Indian Real Estate Market

The Indian real estate market is constantly evolving, offering investors a promising landscape to explore. Let's delve into the current state of the Indian real estate market, armed with compelling statistics and insightful analysis.


1. Market Size and Growth:



Data Source: Statista


The Indian real estate industry has been growing steadily. According to Statista, the market size of the real estate industry in India was valued at around $120 billion in 2017 and is estimated to reach $1 trillion by 2030. This indicates significant growth potential for investors in the coming years.


2. Residential Sector:

The residential sector remains a major segment of the Indian real estate market. Demand for affordable housing has been on the rise, driven by factors such as 

  • Urbanization
  • Population growth
  • Government initiatives like the Pradhan Mantri Awas Yojana (PMAY)


According to a report by Knight Frank, the residential market in India witnessed sales growth of 68% year-on-year in 2022.


3. Commercial Sector:

The commercial real estate market in India is doing very well, especially in big cities like 

  • Mumbai
  • Delhi
  • Bengaluru

The demand for office spaces, retail stores, and shared workspaces is increasing because of the growth of industries like IT/IT, e-commerce, and startups. JLL reports that office leasing in India reached a new high in the first half of 2021, showing that the commercial real estate market is strong.


II. Trends in Real Estate Investment in India


As we gear up for 2024, the landscape of real estate investment in India is undergoing fascinating transformations. To stay ahead in the game, it's crucial to understand the trends that will shape the market in the coming year.


1. Residential real estate continues to Shine:

India's middle class is on the rise, and with it, the demand for residential properties is skyrocketing. Urbanization trends are fueling this growth as more and more people flock to cities in search of better opportunities. But it's not just the middle class that's driving this demand—affordable housing schemes and improved infrastructure are also playing a major role.

In fact, according to ANAROCK Research, the first half of 2023 saw record-breaking housing sales of approximately 2.29 lakh units across the top 7 cities. And get this: despite rising interest rates and housing prices, this is over 63% of the total sales recorded in the entire year of 2022! It's clear that the demand for residential properties in India is only going to continue to grow, and savvy investors would do well to take note.

        
Also Read: What are Urban gated apartments, and how do they serve the needs and benefits?

2. Rise of Co-living and Co-working Spaces:





The sharing economy is revolutionizing the real estate game, and it's time to jump on board! Millennials and professionals alike are flocking to co-living and co-working spaces, creating a hotbed of opportunity for savvy investors. Mordor Intelligence reports that the India Co-working Office Spaces market is already worth a staggering USD 1.78 billion this year, with a projected growth rate of over 7% in the coming years.


3. Tier 2 and Tier 3 Cities on the Radar:

In recent times, smaller cities have caught the interest of investors searching for the next lucrative opportunity. These cities provide a distinctive combination of affordability and growth potential, making them an appealing choice for those aiming to diversify their investment portfolio. Pune, Hyderabad, and Chandigarh are among the cities that have experienced remarkable growth in the real estate sector, thanks to the emergence of new developments and infrastructure projects that have spurred demand.


III. Government Initiatives and Policies Impacting Real Estate Investment

The Indian government plays a pivotal role in shaping the real estate landscape, and understanding the latest policies and initiatives is crucial for savvy investors.


1. Affordable Housing Initiatives:



Source: Wikipedia


The Union Budget 2023–24 has set aside 79,000 crores for the Pradhan Mantri Awas Yojana (PMAY), which is a massive boost to the government's housing program for the urban poor. This initiative is a ray of hope for millions of people who dream of owning a home but are held back by financial constraints.


2. Real Estate Regulation and Development Act (RERA):

RERA has brought much-needed transparency to the sector. It mandates developers to register their projects, provide accurate project details, and adhere to timelines. This has boosted confidence among buyers and investors alike.

        
3. Goods and Services Tax (GST):

The implementation of GST has revolutionized taxation, making transactions smoother than ever before. With a uniform tax structure, complexities have been eliminated, replacing multiple taxes like service tax and VAT. Plus, the GST rates for residential properties are a mere 5%, while commercial properties are taxed at 18%.


4. Foreign Direct Investment (FDI) Policy:

India's real estate market is booming thanks to its investor-friendly FDI policies and increased transparency in deals. Livemint reports that foreign investments make up a whopping 81% of total investments, while institutional investments in Q1 2023 saw a 37% YoY increase to $1.7 billion, led by the office sector.


IV. Emerging Technologies in the Indian Real Estate Sector





The real estate scene in India is undergoing a digital transformation, fueled by the infusion of cutting-edge technologies that are revolutionizing how investors, developers, and homebuyers interact with the market.  


1. Proptech Revolution:

It's an exciting time for India's proptech ecosystem, as a multitude of startups are emerging with groundbreaking solutions. According to Fintrackr's analysis, an impressive $345 million was raised by over 29 real estate startups between January 2021 and March 2023, contributing to a staggering total funding of $2.4 billion. This remarkable growth can be attributed to platforms that simplify property discovery, enable seamless digital transactions, and even offer immersive virtual property tours.


2. Proprietary Data Analysis:

In the exciting world of real estate investment, data is the new king! With the power of big data and artificial intelligence, investors can now make informed decisions like never before. They can analyze market trends, predict property values, and even discover those hidden investment gems. This data-driven approach not only brings transparency to the game but also helps minimize risks.


3. Augmented Reality (AR) and Virtual Reality (VR):

Augmented Reality (AR) and Virtual Reality (VR): These technologies are revolutionizing property viewing. Homebuyers can take virtual tours of properties from the comfort of their homes, saving time and reducing the need for physical site visits.


4. Blockchain in Property Transactions:

Revolutionizing property transactions, blockchain technology is boosting security and transparency. Smart contracts, fueled by blockchain, are automating the transfer of property titles and funds, slashing the time and costs linked to property transactions.

      
V. Built To Rent: A Growing Demand in India

In the dynamic landscape of real estate investment in India for 2024, a trend that's gaining significant traction is the "Built to Rent" (BTR) sector. As urbanization surges and lifestyles evolve, BTR properties have become an attractive option for both investors and tenants.

          
1. Expanding Urban Population:

India is witnessing a rapid urbanization wave. By 2030, it's estimated that 40% of India's population will reside in cities. This migration is driving the need for rental housing close to job hubs and city centers.


2. Millennial Preference:

Millennials, a dominant force in India's workforce, prefer flexibility and quality living over property ownership. Built to Rent properties offer fully furnished, hassle-free accommodation that aligns with their lifestyles.


3. Rental Yields:

Investors are lured by the lucrative rental yields that BTR properties promise. With a steady influx of tenants and rental income, BTR assets are becoming a valuable addition to investment portfolios.

4. Amenities and Community Living:

BTR properties are often equipped with modern amenities and community spaces, making them more appealing to tenants. This trend is transforming rental properties into holistic living experiences.


VI. Sustainable Development in the Indian Real Estate Market

Sustainability is no longer an option; it's a mandate in the Indian real estate market for 2024. As urbanization continues, so does the pressure to create eco-friendly and efficient structures. 


Green Building Certifications:  In 2021, India ranked 3rd globally for LEED-certified green buildings, emphasizing the industry's commitment to sustainability.


Renewable Energy Integration:  Solar panels and wind turbines are increasingly being incorporated into real estate projects, reducing energy costs and carbon footprints.


Water Management: Water recycling and conservation measures are being adopted to help address India's water scarcity challenges.


Waste Reduction: Developers are minimizing construction waste and promoting recycling to reduce environmental impact.


VII. Real Estate Investment Trusts (REITs) in India

REITs continue to reshape the Indian real estate investment landscape in 2024. The three office-backed REITs are Embassy Office Parks REIT, Mindspace Business Parks REIT, and Brookfield India Real Estate Trust. Nexus Select Trust is India's first REIT backed by retail assets.


Steady Growth: India's REIT market has seen a steady surge since its inception in 2019. 


Diversification: REITs allow investors to diversify their portfolios without the hassle of property management. They offer a mix of commercial properties, including office spaces, malls, and warehouses.


High Yields: REITs provide attractive yields, often surpassing traditional investment options, making them an appealing choice for income-oriented investors.


Transparency and Regulation: Strict SEBI regulations ensure transparency, investor protection, and efficient management of REITs.


In the ever-evolving realm of real estate investment in India, 2024 offers a promising landscape. Emerging technologies, such as proptech and sustainable development, are driving change and innovation. Built to Rent properties are gaining momentum, catering to the shifting lifestyles of urban dwellers. Real Estate Investment Trusts (REITs) continue to provide a viable option for investors, offering diversification and steady growth.



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